Systematics of Advanced Capital Market Models based on Empirical Research
The complex blue prints of ODE and PDE based capital market models remain closed to systematic review. Particularly, when some authors of mathematical models can not or may not offer explicit solutions. Artificially generated 'cloned' courses can demonstrate the impact of various types of stochastic volatility in these cases. The Black and Scholes formula has the disadvantage that its key variable, the (future) volatility. is not known. In fact, what is known is that the volatility is volatile itself and the assumption of a stable volatility is violated. The socalled advanced models try to model the stochastic volatility. However, this still implies assumptions how a particular volatility may (or may not) develope until a given point of time. An analysis of key indexes shows stochastic properties difficult to cover in mathematical models yet being still interesting.
|Date of creation:||14 Dec 2005|
|Note:||Type of Document - pdf; pages: 28. First Systematics of advanced Capital Market Models|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
References listed on IDEAS
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- Bakshi, Gurdip & Cao, Charles & Chen, Zhiwu, 2000.
"Do Call Prices and the Underlying Stock Always Move in the Same Direction?,"
Review of Financial Studies,
Society for Financial Studies, vol. 13(3), pages 549-584.
- Charles Quanwei Cao & Gurdip S. Bakshi & Zhiwu Chen, 1999. "Do Call Prices and the Underlying Stock Always Move in the Same Direction?," Yale School of Management Working Papers ysm125, Yale School of Management.
- Bollerslev, Tim & Engle, Robert F. & Nelson, Daniel B., 1986. "Arch models," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 49, pages 2959-3038 Elsevier. Full references (including those not matched with items on IDEAS)
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